Something else that seems a possibility could be that the Fields and some of the debt-holders might be interested in taking the company private. Being public isn't helping the company anymore, and people have speculated for the better part of the last year that, with the stock price so low, getting many or most of the shareholders out might not be that difficult.
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Audacy bankruptcy could occur by month's end
- Thread starter MarkW
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Something else that seems a possibility could be that the Fields and some of the debt-holders might be interested in taking the company private. Being public isn't helping the company anymore, and people have speculated for the better part of the last year that, with the stock price so low, getting many or most of the shareholders out might not be that difficult.
The current stockholders are behind $1.9 billion in debt in a company whose business valuation is almost certainly shy of $1 billion. Buying out the current shareholders without resolving the debt situation accomplishes absolutely nothing (it would be tantamount to burning your own money). Buying first lien paper at a steep discount would be the move to make if we're talking pre-filing strategy. Pre-filing, you want to be at the top of the capital stack (i.e. first lien debt), not the bottom (i.e. common equity).
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Assuming the first lien is taken care of, can Audacy generate enough cash to pay the second lien holders notes when they come due?
You're right that traditional media companies no longer have much of a future remaining publicly traded.
As MarkW says; taking the company private with such a depressed share price will be problematic. But there may be enough free cash to set up a share palatable buy-back plan. All this may be a reason the Fields want to conserve cash and renegotiate the debts rather than spend that cash paying back loans.
I agree. All renegotiating will do is buy them some time to figure out a long game.
The main reason the stock is in the crapper is because the company can't afford its debt, so stockholders risk being wiped out in a bankruptcy filing.
If David Field came up with $400-$500 million to recapitalize the company, pay down most of the 2024 debts and reduce the percentage of the revolver in use, the stock would respond very positively. But we're deep into the 11th hour for that.
No, they cannot unfortunately.
The second lien noteholders are going to lose their shirts, in my estimation. I don't at all see how that is avoidable.
Best case scenario for them may be a big equity stake in a reorganized company, but if the 1st lien lenders are deemed impaired, then the ability for the second lien noteholders to receive most of the equity in a newco diminishes.
Let's say a judge were to agree to a plan that entails a $500 million exit term loan, proceeds of which would be granted to prepetition 1st lien lenders. Maybe some of those proceeds are needed for dry powder purposes or for payment of unsatisfied admin claims, so let's say for sake of argument the 1st lien lenders receive $475 million. Let's further assume for sake of argument the company is deemed to be worth $950 million. Let's finally further assume the total claim of the 1L noteholders is actually $900 million due to unpaid accrued interest.
Under the above illustrative scenario, opening equity would be worth $450 million (before taking any reinstated receivables and payables into account). The 1L lenders would have $425 million in unsatisfied claims. Therefore, they would ostensibly receive 94.44 percent of equity in a newco. The claim holders behind them in the prepetition capital stack (such as the 2L noteholders) would receive the remainder. Because of the nuisance value concept I mentioned earlier, maybe the 1L claim holders settle for a bit less, say 92 percent.
Plans for companies of this size often contain a management incentive plan component that allows new shares to be issued in the future in a manner that would be dilutive. Usually the number of shares permitted to be issued under such a provision over a series of years in the aggregate are no greater than 10 percent of the number of pre-diluted shares, but it wouldn't surprise me if exceptions exist.
If we replace the $950 million business valuation in the above example with $1.1 billion and increase the opening term loan balance to $600 million, then obviously the math changes and the 2L noteholders would stand to see a somewhat improved recovery (albeit still fractional compared to their prepetition claim and still non-cash in nature unless a deal is made either during or after BK to sell those shares in newco for cash or to accept cash in lieu of shares).
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I think that's going to be a non-starter with Audacy. Here's the deal iHeart made 5 years ago, as reported in Inside Radio:
They were talking about much bigger numbers to reach that 94% stake. By the time iHeart did that, they had already spun off their tower land. Audacy hasn't done that yet.
Dickey Lew, before Lew can dickey you.Keep in mind that yes, Lew Dickey raised some money, but TTBOMK never really spent it.
This was all he bought:
Lew Dickey Among Investors Swindled By Former Akazoo Managers, Investigation Finds.
Akazoo, the Luxembourg-based streaming music service propelled onto the U.S. radio industry’s radar last year via a high profile merger, says its special committee completed an internal investigation and foundwww.insideradio.com
I honestly was unaware an early version of the iHM plan entailed a 94 percent stake. The fact that number matches the number in my illustrative example is coincidental.
I will say the reason I used $950 million as my illustrative business valuation figure is because I think that's probably in the ballpark of where the true business valuation resides. I would put the range somewhere between $800 million and $1.1 billion.
I'm sure it will depend on the response to this latest action.
No one company has the money to buy all the stations. EMF does not need that many stations. Audacy would probably have to sell station by station and not cluster by cluster. Maybe a small operator can grab a few stations here and there.
In Rhode Island Audacy has 1 station. I know a small owner that might put a bid on it. In Springfield, Mass Audacy has 2 FM and 1 AM with translator. This small operator may be able to bid for these stations too. He owns 2 AMs with translators in this market. I think he's maxed out in Hartford. He already owns 4 AMs with translators and 2 FMs in the market. Audacy has 3 FMs and 1 AM in Hartford.
In Rhode Island Audacy has 1 station. I know a small owner that might put a bid on it. In Springfield, Mass Audacy has 2 FM and 1 AM with translator. This small operator may be able to bid for these stations too. He owns 2 AMs with translators in this market. I think he's maxed out in Hartford. He already owns 4 AMs with translators and 2 FMs in the market. Audacy has 3 FMs and 1 AM in Hartford.
The value of the stations is enhanced where there is a working cluster dynamic where the total is greater than the sum of the parts.
They sold a station in Buffalo, IMHO, because they did not have a viable cluster dynamic: too many AMs and not enough FMs. But breaking up working clusters will severely impact the value of each station.
I would be very surprised to see a complete liquidation. It didn't happen with iHeart or Cumulus.
What happened in those two cases was selected sales. They're looking at every cluster to see which ones are losing money. In the case of Cumulus, they basically got out of NY and LA. iHeart did the opposite and sold off a bunch of small markets.
Very doubtful that either Audacy will want to sell profitable stations, or that iHeart will take on more debt.
Remember that iHeart is just emerging from bankruptcy. They won't be buying clusters.
I can see Audacy getting rid of a few of the clusters outside the Top 50, but not much within that range. They also probably wouldn't sell any of the CBS stations due to the tax ramifications. I have an idea on which markets could be targets, but I agree with DavidEduardo that it doesn't do any good to sell one station, it needs to be an entire cluster, and that's going to take some bucks.
Why would you even want that?
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